First-Time Buyer Mortgage Rates in 2024: What Recent Changes Mean for You

If you’re looking to get on the property ladder as a first time buyer, finding the most suitable mortgage product can be a minefield, and fluctuating mortgage rates don’t make it any easier. Rates and house prices can, and do, rise and fall, making it hard to determine the most affordable time to buy a home, especially if you want to lock in a competitive fixed-rate mortgage deal. Mortgage rate trends have shifted significantly in the last 12 months and understanding these changes will help you make informed decisions when choosing a suitable mortgage.

In this article, we’ll examine first-time buyer mortgage rates, recent changes, and what this means for you.

What’s Changed?

In July 2023, mortgage rates peaked due to inflation and rising Bank of England base rates. At that time the average 5-year fixed 80% LTV mortgage rate was 6.12% for buyers with a 20% deposit. Fast forward to today and rates have fallen to 4.76%. That may seem like a small change but in real terms, it’s a big difference. The average monthly payment has gone from £1,096 to £949.[1]

 

Why It Matters

Lower mortgage rates mean lower monthly repayments, letting borrowers save money and making homeownership more achievable for many first-time buyers. These rates are not uniform across the UK. In London, the savings are even higher with average mortgage repayments over £300 lower than they were previously.

Why Are Rates Falling?

Rates are falling due to the Bank of England cutting interest rates. In August, after almost a year at 5.25%, the base rate was reduced and lenders responded by offering more competitive mortgage deals. The markets had been expecting this, so mortgage providers like Nationwide had already reduced their rates.

Inflation

Inflation is a key driver of mortgage rates. Over the last 12 months, the UK has seen a big fall in inflation and that’s led to expectations of more base rate cuts. That gives lenders the confidence to offer more competitive rates to borrowers.

Government Stability

A stable government post-election has also helped rates fall. Political stability often means economic confidence and that in turn affects lending behaviour and mortgage rates.

Buy Now or Wait?

With rates falling many first-time buyers are faced with a choice: apply for a mortgage now or wait for lower rates in 2024?

Reasons to Buy Now

• Immediate Savings: Get the current lower rates and reduce your monthly payments.
• Market Stability: Get in the market now and lock in rates before any volatility.
• Equity Building: The sooner you buy the sooner you start building equity in your home.

Reasons to Wait

• Further Rate Cuts: If rates continue to fall waiting could mean even lower monthly payments and a reduction of the overall cost over your mortgage term.
• Market Volatility: The housing market could move and property prices and mortgage availability could be impacted.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

 

What Else Affects Your Rate?

While the base rate and inflation are big factors, other things affect your rate.

Mortgage Deposit Size

How much deposit you pay can affect your mortgage rate. A bigger deposit usually means a lower mortgage rate. Lenders see buyers with larger deposits as lower risk and can then offer lower priced products. First-time buyers should plan to pay a minimum deposit of 5-10% of the property value.

Government schemes offer relief for many buyers, and some require little or no deposit. Borrowers who qualify for the mortgage guarantee scheme only need 5% of the purchase price as a deposit.

Credit Score

Your credit history is a key factor in the rate you’re offered. A higher score means you can get more competitive rates. It’s important to build a healthy credit history before starting your mortgage journey.

Product Term

The length of your mortgage product also affects the rate. Currently five year fixed deals generally have lower rates than shorter term options.

Mortgage Type

The type of mortgage you choose can affect the rate you pay. For example, tracker mortgages, including variable rate mortgages, rise and fall depending on the Bank of England’s base rate, while a fixed rate mortgage locks in your initial interest rate for a set period.

For many borrowers, a joint mortgage is a good option for dividing up costs. Shared ownership, where you buy a share of a residential property and pay rent on the remaining amount, and interest only, where your monthly repayments are only interest, can also reduce the financial burden.

If rates drop even further and you are no longer happy with your initial mortgage rate, you may be able to remortgage for a better rate.

 

 

How Can a Broker Help?

The mortgage market is complex and for a first-time buyer getting on the property ladder, it can be overwhelming. That’s where a mortgage broker like Eden Hawk Financial Solutions comes in.

Expertise and Guidance

Mortgage brokers know the market inside and out and can offer tailored advice to your individual circumstances during your mortgage application and throughout the entire mortgage process. They can help you get and interpret your agreement in principle, compare mortgages, talk to estate agents, explain complex terms and find the most suitable deals for you.

Exclusive Deals

Brokers have access to mortgage deals that may not be available if dealing with a lender directly. Eden Hawk Financial Solutions have access to products representative of the whole of the market thanks to being an appointed representative of Quilter Financial Planning network.

Save Time and Reduce Stress

By doing the legwork, a broker can save you time and reduce the stress of finding and applying for a mortgage.

Conclusion

First-time buyer mortgage rates have changed significantly in the last 12 months, creating a more buyer-friendly market. With rates making homeownership more accessible, now is the time to explore your options. Whether you buy now or wait for lower rates, make sure you’re informed and prepared.

If you’re ready to get started, Eden Hawk Financial Solutions is here to help you through the process and find the most suitable deal for you.

 

[1] https://www.rightmove.co.uk/news/articles/property-news/first-time-buyer-mortgage-payments-drop-150/